Labor Market Equilibrium

Labor Market Equilibrium Hwei-Lin Chuang, Ph.D. 2014/04/17

勞動基準法 • 意義: • 規定勞動條件最低標準，為保障勞工權益，加強勞雇關係，促進經濟發展，適用勞基法之勞工權益將獲得最基本之保障，雇主與勞工所訂勞動條件，不得低於本法所定之最低標準。 • 「勞工」認定: • 雇主與勞工之間一定會有「僱傭關係」，通常以勞工與雇主要具有從屬性之關係，成為判斷是否為勞工的重要依據。 • 勞工特徵-勞工的報酬是提供勞務之對價、勞工有接受管理考核及獎懲等義務、勞工應辦理請假手續、勞工對提供勞務之方法較沒有較大之決定權、勞工通常有出勤記錄及差勤管理、勞工有專屬性。

勞動基準法 • 勞動契約: • 不以書面為必要，口頭即可成立，而內容只要不違反法律強制禁止規定或公序良俗，即為有效。勞動契約也是約定勞雇關係之契約，其約定事項諸如工資、工時、工作內容等等，皆可於契約中加以約定。 • 契約種類則依工作性質之有無繼續性，可分為定期契約與不定期契約(非一定時間可以完成之繼續性工作)兩種，定期契約又可再細分為臨時性、短期性、季節性及特定性4種。 • 資遣費: • 勞退舊制-每滿1年發給1個月平均工資。有剩餘月數或工作未滿1年者，以比例計給之。未滿1個月以1個月計。 • 勞退新制-每滿1年發給二分之一個月之平均工資，最高發給6個月平均工資。未滿1年者以比例計給。

勞動基準法 • 工資 • 勞工因工作而獲得之報酬，包括工資、薪金及按計時、計日、計月、計件以現金或實物等方式給付之獎金、津貼及其他任何名義之經常性給與均屬之。 • 延長工作時間者，按平日每小時工資額加倍發給之-延長工作時間在2小時以內者，按平日每小時工資額加給三分之一以上。 • 工時 • 勞工每日正常工作時間不得超過8小時，每2週工作總時數不得超過84小時。 • 延長工時連同正常工時，1日不得超過12小時。延長之工時，一個月不得超過46小時(不含休假日加班)。 • 勞工繼續工作4小時，至少應有30分鐘之休息。

勞動基準法 • 休假: • 勞工在同一雇主或事業單位，繼續工作滿一定期間，每年應依規定給予特別休假，工資照給：(1)1年以上3年未滿者7日。(2)3年以上5年未滿者10日。(3)5年以上10年未滿者14日。(4)10年以上者，每滿1年加給1日，加至30日為止。 • 請假: • 給薪假：婚假、喪假、公傷病假、公假、陪產假等 • 視情形給薪之假：普通傷病假、生理假等。 • 可不給薪假：事假、家庭照顧假等。 • 例假: • 勞工每7日中至少應有1日之休息，作為例假，工資照給。

勞動基準法 • 退休: • 條件分為1.自請退休(1)工作15年(須同一雇主)以上且年滿55歲(2)工作25年(須同一雇主)以上(3)工作10年(須同一雇主)以上且年滿60歲。2.強制退休(1)年滿65歲(2)心神喪失或身體殘廢不堪勝任工作。 • 退休金為年滿 60 歲以上者，勞工即得向勞保局請領之。年資滿 15 年以上，請領月退休金；年資未滿 15 年，則請領一次退休金。勞工於請領退休金前死亡時，由遺屬或指定請領人請領一次退休金。 • 職業傷害 • 勞工因遭遇職業災害而致死亡、殘廢、傷害或疾病時，雇主應依規定予以補償，但如同一事故，依勞工保險條例或其他法令規定，已由雇主支付費用補償者，雇主得予以抵充之。

就業市場指標 資料來源：行政院主計處，中華民國台灣地區人力資源調查統計年報、速報。

失業規模指標 資料來源：行政院主計處，中華民國台灣地區人力資源調查統計年報、速報。

Introduction • Labor market equilibrium coordinates the desires of firms and workers, determining the wage and employment observed in the labor market. • Market types: • Perfect Competition • Monopsony: one buyer of labor • Monopoly: one seller of product • These market structures generate unique labor market equilibria.

Labor Market Equilibrium • Workers prefer to work when the wage is high, and firms prefer to hire when the wage is low. Labor market equilibrium “balance out” the conflicting desires of workers and firms and determines the wage and employment observed in the labor market.

1. Equilibrium in a Single Competitive Labor Market The supply curve gives the total number of employee-hours that agents in the economy allocate to the market at any given wage level; the demand curve gives the total number of employee-hours that firms in the market demand at that wage. Equilibrium occurs when supply equals demand, generating the competitive wage w * and employment E *. Dollars S W* D E* Employment Equilibrium in a Competitive Labor Market Note: There is no unemployment in a competitive labor market. Persons who are not working are also not looking for work at the going wage.

Note: The “single wage” property of competitive equilibrium has important implications for economic performance. That is, workers of given skills have the same value of marginal product of labor in all markets. The allocation of workers to firms which equates the value of marginal product across markets is also the allocation which maximizes national income. This type of allocation is called an efficient allocation.

(Pareto) Efficiency • Pareto efficiency exists when all possible gains from trade have been exhausted. • When the state of the world is Pareto Efficient, to improve one person’s welfare necessarily requires decreasing another person’s welfare. • In policy applications, ask whether a change can make any one better off without harming anyone else. If the answer is yes, then the proposed change is said to be “Pareto-improving”.

Dollars S P w* Q EL E* EH Employment Equilibrium in a Competitive Labor Market The labor market is in equilibrium when supply equals demand; E* workers are employed at a wage of w*. In equilibrium, all persons who are looking for work at the going wage can find a job. The triangle P gives the producer surplus; the triangle Q gives the worker surplus. A competitive market maximizes the gains from trade, or the sum P + Q. D0

Efficiency Revisited • The “single wage” property of a competitive equilibrium has important implications for economic efficiency. • Recall that in a competitive equilibrium the wage equals the value of marginal product of labor. As firms and workers move to the region that provides the best opportunities, they eliminate regional wage differentials. Therefore, workers of given skills have the same value of marginal product of labor in all markets. • The allocation of workers to firms that equates the value of marginal product across markets is also the sorting that leads to an efficient allocation of labor resources.

2. Competitive Equilibrium Across Labor Markets The economy typically consists of many labor markets, even for workers who have similar skills. As long as either workers or firms are free to enter and exit labor markets, a competitive economy will be characterized by a single wage. SN Dollars Dollars S’S S’N SS WN W* W* WS DS DN Employment Employment Competitive Equilibrium in Two Labor Markets Linked by Migration

Competitive Equilibrium Across Labor Markets • If workers were mobile and entry and exit of workers to the labor market was free, then there would be a single wage paid to all workers. • The allocation of workers to firms equating the wage to the value of marginal product is also the allocation that maximizes national income (this is known as allocative efficiency). • The “invisible hand” process: self-interested workers and firms accomplish a social goal that no one had in mind, i.e., allocative efficiency.

自由貿易協議(FTA)對就業政策之影響

自由貿易協議(FTA)對就業政策之影響 • The Obama Administration finalized negotiations with South Korea in early December 2010 on abilateral free trade agreement. As a result, the administration is expected to submit implementinglegislation to the 112th Congress on the proposed agreement, but to date has not indicated atimeline for doing so. The 112th Congress may also be asked to consider implementing legislationfor proposed free trade agreements with Columbia and Panama. Congress not only plays a directrole in approving legislation that implements the provisions of free trade agreements, but alsoauthorizes and appropriates funding for programs that are meant to provide special assistance tofirms and workers that are dislocated as a result of lower barriers to trade. Since the proposedagreement covers a wide range of trade and investment issues, it could have substantial economicimplications for both the United States and South Korea. South Korea is the seventh-largesttrading partner of the United States, and the United States is South Korea’s third-largest tradingpartner.

自由貿易協議(FTA)對就業政策之影響 • Similar to other trade agreements, the proposed U.S.-South Korea Free Trade Agreement(KORUS-FTA) has attracted both supporters and detractors, primarily over the impact theagreement could have on employment in the economy. Supporters argue that the agreement couldcreate as many as 280,000 jobs in the economy. Others, however, argue that the agreement couldlead to an overall loss of up to 159,000 jobs in various sectors of the economy. Still otherscontend that the United States stands to lose exports, employment, and extended economicopportunities if it fails to sign a trade agreement, while the European Union and other nations arelining up to finalize similar agreements with South Korea. • Estimating the economic impact of trade agreements, however, is a daunting task, due to a lack ofdata and important theoretical and practical matters associated with generating results fromeconomic models. In addition, such estimates provide an incomplete accounting of the totaleconomic effects of trade agreements. This report assesses the results of a number of models thatare being used to generate estimates of the effect of the KORUS FTA on employment.

自由貿易協議(FTA)對就業政策之影響 • Thesestudies were chosen specifically because they estimate (or can be used to estimate) data onemployment effects of the trade agreement. All economic models incorporate variousassumptions that are necessary in order for the model to generate results. Invariably, theseapproaches determine, to some extent, the results that are generated and, therefore, limit theirrepresentation of the real world economy. Currently, the various models produce widely disparateestimates of the number of jobs affected by the trade agreement, reflecting the variousassumptions that are used in the models and differences in the approaches. • From the perspective of a large open economy such as the U.S. economy, international trade isnot a major determinate of total employment in the economy, real wages in the economy, or theoverall level of production. This is especially true for bilateral trade agreements with individualcountries where the impact on the economy as a whole is expected to be small. Nevertheless,some sectors of the economy are likely to be affected more than others. Congress hasdemonstrated an ongoing interest in assessing the economic impact of trade agreements and, attimes, has provided assistance to those workers and firms that are disproportionately affected.

自由貿易協議(FTA)對就業政策之影響 • 內容:

自由貿易協議(FTA)對就業政策之影響 • 內容(續):

3. THE COBWEB MODEL • Our analysis of labor market equilibrium assumes that markets adjust instantaneously to shifts in either supply or demand curves, so that wages and employment change swiftly from the old equilibrium levels to the new equilibrium level. Many labor markets, however, do not adjust so quickly to shifts in the underlying supply and demand curves. • Example: the Engineering Market Note: The adjustment of college enrollments to changes in the returns to education is not always smooth or rapid, particularly in fields that are highly technical. → The inability to respond immediately to changed market conditions can cause boom-and-bust cycles in the market for highly technical workers.

Wage S W1 W3 We W2 D’ W0 D N2 N3 N1 N0 Number of Engineers Demand increase to D’ temporary supply is N0 → W increase to W1 → W1 wage induce increase in supply to N1→ excess supply → W reduce to W2 → W2 wage reduce supply to N2 → W increase to W3 → at W3 , supply increase to N3 → excess supply → W reduces, etc.

Overtime the swings become smaller and eventually equilibrium is reached. → cobweb model. Note: There are two key assumptions in the cobweb model: • It takes time to produce new engineers, so that the supply of engineers can be thought of as being perfectly inelastic in the short run. • Students are very myopic when they are considering whether to become engineers.

Payroll taxes on employers are heavily used in the social insurance area. With our simple labor model, we can show that the party making the social insurance payment is not necessarily the one that bears the burden of the tax. 4. POLICY APPLICATION: PAYROLL TAXES Tax is a fixed dollar amount X. D0→D1 with vertical distance of X. pt. A: excess supply→ real wage↓ Employees bear part of the burden of the payroll tax in the form of lower wage rates and lower employment levels. Tax Real Wage S0 W0+λ W1+X W0 Note: In general, the extent to which the labor supply curve is sensitive to wages determines the proportion of the employer payroll tax that gets shifted to employee’s wages. W1 D0 D1 E2 E1 E0 Employment

Payroll Taxes and Subsidies • Payroll taxes assessed on employers lead to a downward, parallel shift in the labor demand curve. • The new demand curve shows a wedge between the amount the firm must pay to hire a worker and the amount that workers actually receive. • Payroll taxes increase total costs of employment, so these taxes reduce employment in the economy. • Firms and workers share the cost of payroll taxes, since the cost of hiring a worker rises and the wage received by workers declines. • Payroll taxes result in deadweight losses.

S1 Dollars S0 w0 + 1 w1 w0 w1 1 D0 D1 E1 E0 Employment The Impact of a Payroll Tax Assessed on Workers A payroll tax assessed on workers shifts the supply curve to the left (from S0 to S1). The payroll tax has the same impact on the equilibrium wage and employment regardless of who it is assessed on.

Dollars S D0 A w0 B w0 – 1 D0 D1 E0 Employment The Impact of a Payroll Tax put on Firms with Inelastic Supply A payroll tax assessed on the firm is shifted completely to workers when the labor supply curve is perfectly inelastic. The wage is initially w0. The $1 payroll tax shifts the demand curve to D1, and the wage falls to w0 – 1.

Payroll Subsidies • An employment subsidy lowers the cost of hiring for firms. • This means payroll subsidies shift the demand curve for labor to the right (up). • Total employment will increase as the cost of hiring has fallen.

S w0 + 1 w1 B w0 A w1 – 1 D1 D0 E0 E1 Employment The Impact of an Employment Subsidy An employment subsidy of $1 per worker hired shifts up the labor demand curve, increasing employment. The wage that workers receive rises from w0 to w1. The wage that firms actually pay falls from w0 to w1 – 1.

台灣基本工資 • 台灣基本工資制度，目前由勞工委員會基本工資審議委員會，於每年第三季實施討論，並交由行政院核定公告後實施。現行基本工資於2014年1月1日實施，月薪為19,047元新台幣（約633美元），時薪為115元新台幣（約3.82美元）。

台灣基本工資-實施歷程 • 1968年，中華民國行政院發佈《基本工資暫行辦法》，將基本工資（月工資）定為600元，是台灣首次以法規命令規定全國性的最低工資。 • 1984年開始實施的《勞動基準法》第21條規定：「工資由勞僱雙方議定之。但不得低於基本工資。」。 • 1986年11月21日，立法院廢止1936年12月11日在大陸制定，12月23日公布，但施行日期一直沒有以命令定之的《最低工資法》23條，1986年12月3日總統公布廢止。

台灣基本工資-實施歷程(續) • 1988年，行政院勞工委員會通過《基本工資審議辦法》之後，制定基本工資的相關政策，並開始逐年審議調整。惟1997年調整至每月新台幣15,840元過後，因亞洲金融風暴、產業大量外移等影響，至2007年為止，曾近十年不調整基本工資。 • 2007年，基本工資計入假日工時制，大幅調整時薪部分，但月薪僅做約9%的調整。 • 2010年起，交由基本工資審議委員會由勞、資、政三方各7位代表議決，並將會議結果上呈行政院，由行政院核定公告後實施。

2012年基本工資審議 • 2012年基本工資審議委員會於8月9日召開委員會議，時值遭逢歐債危機、中國經濟成長減緩，導致台灣出口產值下滑，但物價卻仍持續上升，為此次審議增添爭議性，工商團體亦是事隔3年後再次反對調整基本工資。原決議基本工資調幅為1.42％（月薪制），為每月19,047元新台幣，每小時109元新台幣，但此後上呈至行政院時，遭到院會以經濟前景不明為由拒絕提案，這是自1968年之後，行政院首次拒絕基本工資審議委員會提出的基本薪資。

2012年基本工資審議(續) • 最後行政院長陳冲於同年9月26日決議，2013年1月1日起，如期調漲時薪至新臺幣109元，而月薪制則暫緩調漲，維持每月18,780元，並提出經濟成長率須連兩季大於3%，以及失業率低於4%的兩項附帶條件。而時任勞委會主委王如玄，也因此請辭獲准。 • 2013年4月1日，行政院長江宜樺批示勞委會提出的基本工資調漲案，並於4月2日宣布，月薪制基本工資從1日開始，調整至每月19,047元新台幣。

2013年基本工資審議 • 2013年8月28日勞委會召開第26次基本工資審議委員會。共識決議每小時基本工資自2014年元旦起，從109元調整至115元。每月基本工資自2014年7月1日起從19047元調整至19273元，並於9月24日由行政院長江宜樺審核通過。由於政府方面希望避免年度基本工資審議造成的勞資爭端，因此在2014年元旦開始，也設下物價指數累計上漲達3%，才能再度召開基本工資審議會的門檻。

5. Policy Application: The Impact of Minimum Wages • The standard economic model of the impact of minimum wages on employment is illustrated in the following figure: Note: A minimum wage creates unemployment both because some previously employed workers lose their jobs, and because some workers who did not find it worthwhile to work at the competitive wage find it worthwhile to work at the higher minimum wage. Dollars S W W* D E* ES E Employment The Impact of the Minimum Wage on Employment

Dollars Dollars (If workers migrate to covered sector) SU SC SU w SU (If workers migrate to uncovered sector) w* w* DU DC E EU EU EU EC Employment Employment (b) Uncovered Sector The Impact of Minimum Wages on the Covered and Uncovered Sectors (a)Covered Sector If the minimum wage applies only to jobs in the covered sector, the displaced workers might move to the uncovered sector, shifting the supply curve to the right and reducing the uncovered sector’s wage. If it is easy to get a minimum wage job, workers in the uncovered sector might quit their jobs and wait in the covered sector until a job opens up, shifting the supply curve in the uncovered sector to the left and raising the uncovered sector’s wage.

Note: In the absence of a minimum wage, the migration of workers across sectors equates the wage in the two sectors. The migration of workers when the wage in one of the markets is set at the minimum wage equates the expected wage across sectors. I.e., the free migration of workers across sectors ensure that the expected wage in the covered sector equals the for-sure wage in the uncovered sector.

6. Noncompetitive Labor Markets • Monopsony Because the firm is the only demander of labor in this market, it can influence the wage rate. Monopsnoists face an upward-sloping supply curve. This is because the supply curve confronting them is the market supply curve. Note: To expand its work force, a monopsonist must increase its wage rate, i.e., the marginal cost of hiring labor excess the wage.

Noncompetitive Labor Markets: Monopsony • Monopsony market exists when a firm is the only buyer of labor. • Monopsonists must increase wages to attract more workers. • Two types of monopsonist firms: • Perfectly discriminating • Nondiscriminating

Perfectly Discriminating Monopsonist • Discriminating monopsonists are able to hire different workers at different wages. • To maximize firm surplus (profits), a perfectly discriminating monopsonist “perfectly discriminates” by paying each worker his or her reservation wage.

Dollars S A w* w30 VMPE w10 10 30 E* Employment The Hiring Decision of a Perfectly Discriminating Monopsonist A perfectly discriminating monopsonist faces an upward-sloping labor supply curve and can hire different workers at different wages. Therefore the labor supply curve gives the marginal cost of hiring. Profit maximization occurs at point A. The monopsonist hires the same number of workers as a competitive market, but each worker is paid his or her reservation wage.

NondisriminatingMonopsonist • Must pay all workers the same wage, regardless of each worker’s reservation wage. • Must raise the wage of all workers when attempting to attract more workers. • Employs fewer workers than would be employed if the market were competitive.

The Hiring Decision of a NondiscriminatingMonopsonist A nondiscriminating monopsonist pays the same wage to all workers. The marginal cost of hiring exceeds the wage, and the marginal cost curve lies above the supply curve. Profit maximization occurs at point A; the monopsonist hires EM workers and pays them all a wage of wM.

To maximize profits, we know that any firm should hire labor until the points at which marginal revenue product equals marginal cost. MCL W MRP = MCL S Wages are below marginal revenue product for a monopsonist. WC Wm Wm < WC and Em < EC MRP L Em Ec

Dollars MCE S A w* w wM VMPE EM E Employment The Impact of the Minimum Wage on a NondiscriminatingMonopsonist The minimum wage may increase both wages and employment when imposed on a nondiscriminating monopsonist. A minimum wage set at w increases employment to E.

(2) Monopoly A monopoly trying to maximize profits and facing a competitive labor market will hire workers until its marginal revenue product equals the wage rate: MRP = (MPL)(MR) = W → (MR/P)(MPL) = (W/P) <1 The demand-for-labor curve for a firm that has monopoly power in the output market will lie below and to the left of the demand-for-labor curve for an otherwise identical firm that takes product prices as given.

Labor Market Equilibrium